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Author Topic: BRICS Summit - A new bank for a new era NDB  (Read 696 times)
EternalWingsofGod
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July 09, 2015, 07:00:21 AM
 #1

Shifting the topic from Greece the BRICS combined now have the same level of GDP as the USA.
http://www.bloomberg.com/news/articles/2015-07-06/here-s-the-17-trillion-reason-why-the-brics-summit-this-week-is-a-big-deal

At their annual summit in Russia this week, BRICS (Brazil, Russia, India, China, South Africa) leaders will announce the world’s newest multilateral development bank — the New Development Bank (NDB), which will have U.S.$100 billion as initial capital to fund infrastructure and sustainable development projects both in their own countries as well as elsewhere.

BRICS "illustrates a new polycentric system of international relations" demonstrating the increasing influence of "new centres of power,"
Obviously, the NDB should not become another World Bank which finances the same types of projects in the same countries, using the same tools and mindset. At the same time, its purpose should not simply be to symbolise emerging countries’ desire to show off their financial and political power. The reason for its creation must be very substantive.

The NDB should be based on entirely new objectives, to be carried out with new strategies. It would be easy for the NDB to fall into the same track as the World Bank since it is in the same business. But the NDB must resist this from day one.
http://www.thehindu.com/opinion/op-ed/annual-brics-summit-a-new-brics-bank-for-a-new-era/article7396012.ece

http://www.channelnewsasia.com/news/world/putin-welcomes-brics/1970846.html
BRICS "illustrates a new polycentric system of international relations" demonstrating the increasing influence of "new centres of power,"

Among the tangible results of BRICS's emergence has been the establishment of a BRICS bank to finance infrastructure projects in member states and developing countries. The bank, which was officially launched on Tuesday, will start funding proposals early next year, said Russian Finance Minister Anton Siluanov.

Interestingly enough also Russia's new source of finance to counter Western led sanctions in the Eurozone.



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July 09, 2015, 09:26:21 AM
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BRICS is establishing a good system . But then it should be effective enough. Strategy is important , but the implementation is much more necessary. NDB sounds interesting though , but it should not join the list of the dormant  institutions  which never got the chance to perform for a greater good.

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July 09, 2015, 12:09:47 PM
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This event is of great historical importance. It is a signal that the balance of power in the world is changing -  namely shifting away form the US.

Of course the NDB will not be operated out of altruistic motives, but to expand and consolidate the influence of its founding members. However for countries that need investment this is good news, because they now have an alternative to the World Bank.

Hopefully the US will not increase their warmongering because of it...

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July 10, 2015, 09:09:47 AM
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This event is of great historical importance. It is a signal that the balance of power in the world is changing -  namely shifting away form the US.

Of course the NDB will not be operated out of altruistic motives, but to expand and consolidate the influence of its founding members. However for countries that need investment this is good news, because they now have an alternative to the World Bank.

Hopefully the US will not increase their warmongering because of it...

As long as they avoid cold war rhetoric we should be alright although in this age of information with a fairly free internet they will have difficulties controlling the digital media for a while and hopefully forever as propoganda is a power means of controlling a populace.

The summit has ended so putting up a summary of the events

http://uk.reuters.com/article/2015/07/09/emerging-brics-idUKL8N0ZP3KK20150709
The BRICS emerging nations said on Thursday they were worried about the volatility of global financial markets and oil prices and agreed to coordinate efforts to keep their economies stable.

Leaders of Brazil, Russia, India, China and South Africa finally launched the group's largest initiatives to date -- a development bank and a currency pool -- and called at a summit for a swift deal on curbing Iran's nuclear programme.

In addition
India and Pakistan met up decided to have the Indian PM visit.
Russia got PR points
China got a non-compete with the AIIB
Brazil and South Africa will get several projects funded plus enhanced economic cooperation in fields such as agriculture, manufacturing, technology, services, human resources and sustainable development.
http://www.firstpost.com/world/left-high-dry-india-leaves-brics-summit-nothing-really-wanted-2335948.html


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July 10, 2015, 10:02:48 AM
 #5

This is actually a huge step for these countries. Most of them are dwarfed by the economic size of China.
"The combined economic output last year of Brazil, Russia, India, China and South Africa almost matched the U.S.’s gross domestic product."
They are also talking about the creation of a single currency to make trade easier amongst these countries. <currency pool>
Will we see China turning into the biggest economy in the world? I think we will. These countries are rich in minerals and with closer trade relations, they could grow much faster.  

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July 10, 2015, 10:15:43 PM
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This is actually a huge step for these countries. Most of them are dwarfed by the economic size of China.
"The combined economic output last year of Brazil, Russia, India, China and South Africa almost matched the U.S.’s gross domestic product."
They are also talking about the creation of a single currency to make trade easier amongst these countries. <currency pool>
Will we see China turning into the biggest economy in the world? I think we will. These countries are rich in minerals and with closer trade relations, they could grow much faster.  

China was able to pass Japan in terms of  GDP  with estimates to pass the US within the decade that said its divided by their population which is also much larger.
Their is however the issue with China putting to much leverage into its financial market so its pace might slow down in the next few years that said with all the minerals and supplies from this alliance the countries will certainly grow at a brisk pace.

That said speaking of China
http://www.realclearpolitics.com/video/2015/07/10/bbc_chinas_stock_market_lost_value_equal_to_10x_greeces_gdp_this_month.html
http://www.afr.com/markets/china-or-greece-which-is-scarier-20150710-gi94yd

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July 11, 2015, 04:03:29 AM
 #7

...

I am not convinced, for several reasons, that the "BRICS Bank" is much of a long-term threat to the Western financial system.  The BRICS Bank is really two institutions: the NDB and the CRA (both roughly equivalent to the World Bank and the IMF).

From the Fortaleza Declaration:

12. The Bank shall have an initial authorized capital of US$ 100 billion. The initial subscribed capital shall be of US$ 50 billion, equally shared among founding members. The first chair of the Board of Governors shall be from Russia. The first chair of the Board of Directors shall be from Brazil. The first President of the Bank shall be from India. The headquarters of the Bank shall be located in Shanghai. The New Development Bank Africa Regional Center shall be established in South Africa concurrently with the headquarters. We direct our Finance Ministers to work out the modalities for its operationalization.
13. We are pleased to announce the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion. This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements. We appreciate the work undertaken by our Finance Ministers and Central Bank Governors. The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures.


The current commitments to funding are one hurdle they have to overcome (note that all FIVE signatories use US Dollars as their numeraire, ha ha ha!  Straight out of the Agreement...):

i. China - USD 41 billion
ii. Brazil - USD 18 billion
iii. Russia - USD 18 billion
iv. India - USD 18 billion
v. South Africa - USD 5 billion

(Total: $100 billion)

When will that (funding) happen?  Under what circumstances will the Five Amigos agree to fund OTHER countries' projects?  LOL!

*   *   *

The original Bretton Woods documents (setting up the World Bank and IMF in 1948) mentioned the role of gold in their reserves.

China, Russia and India all have lots of gold.  NOWHERE is gold mentioned in the BRICS Bank docs.

*   *   *

A view on the BRICS Bank:

"It is my opinion that the "BRICS Bank" has been born out of frustration and resentment of the more developed world and the way the industrialized countries instruct the borrowers in what they are allowed to do and what not to do.

Also, note that the original term (acronym) for BRIC's (South Africa was recently added to have an African member) was a marketing slogan created by a Goldman Sachs analyst (Jim O'Neill).  Other than resentment of the USA, Europe and Japan, there is relatively little that unites the current five members of the BRICS other than that they are "surplus countries" (exporting more than they import, and so are owners of a lot of US dollars).  That the five BRICS have joined together must make Goldman Sachs crack a smile..."


*   *   *

Some more details of the BRICS Bank (copyright Goldman Sachs):

"The prospects for the NDB and the CRA are uncertain, IMO.  There are numerous examples of other international development "banks" that have not gained traction (eg, the Chiang Mai Initiative (early 2000s, in reaction to perceived inaction in resulting from the Asian Financial Crisis, and the BancoSur (2009) whose foundation was sparked by Hugo Chavez...).  What?!  You have not heard of those two international "banks", the Chiang Mai Initiative and the BancoSur?  They failed...  The BancoSur failed due to "internal contradictions", whoops, sorry Hugo Chavez...

The five BRICS members have relatively little in common other than they do not like the USA and Europe telling them what to do.  To me, the NDB and the CRA almost seem like political documents, despite their similar appearances to the World Bank and the IMF.

They have internal rivalries that are papered over (India and China have not straightened out their borders (although progress maybe has been made), China vs. Russia in the longer term have rivalry issues over Asia and resources, Brazil has stronger trade ties to the USA than to China).  Recall that China's economy dominates all of the others, that gives China a much greater influence over the NDB and the CRA than even the USA has over the World Bank and the IMF..."


*   *   *

Link to above quotations:

http://robertmixblog.blogspot.com/2014/07/the-brics-bank-first-look.html
greBit
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July 11, 2015, 04:27:05 AM
 #8

BRICS is establishing a good system . But then it should be effective enough. Strategy is important , but the implementation is much more necessary. NDB sounds interesting though , but it should not join the list of the dormant  institutions  which never got the chance to perform for a greater good.

A proper planning and a strategy which is prepared for all the worst situations could be the best strategy and it is very important! If there is a falling out and there are no back up plans, it would be a bad fall for them. I think implementation is equally necessary and I am not worried about that at all, because it is not humanly possible for the authorative heads to re-check every move done by the body efficiently.
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July 12, 2015, 08:00:22 AM
 #9

How is brazil included in BRICS? What contributions will such a country do? There's so much of poverty there, like really so much. The poor rural communities live in disadvantaged conditions: education and health facilities are not readily available, water supply and sewage systems are generally inadequate, and rural people face severe constraints in accessing technology and infrastructure. How can such a country invest millions of dollars in 'creative projects?'
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July 13, 2015, 09:29:50 AM
 #10

I think the whole idea with this, is for the stronger economies within this relationship to support the weaker.
Each of these countries has something to offer... Brazil and South Africa = Minerals / China and India = Technology and relative cheap labor and Russia = Oil.

The projects can be anything from Nuclear Power plants or even sustainable energy and agricultural trade. China have very little agricultural land to cultivate produce, where the other countries have loads of land, but lack the funding and technology to use it to it's full potential.   

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